We provide empirical evidence that risk sharing enhances specialization in production. To the best of our knowledge, this well-established and important theoretical proposition has not been tested before. Our empirical procedure is summarized as follows. First, we construct a measure of...

This paper investigates whether risk sharing, measured as income and consumption smoothing, among countries in the EU and the European economic and monetary union (EMU) has increased since the adoption of the euro. We ask: Have the recent increase in foreign equity and debt holdings been...

Regions within the United States routinely experience economic fluctuations that differ from those of other regions. For example, in the past few years, falling wheat prices have slowed growth in the value of total output in Kansas. Such developments can pose concerns for policymakers because...